Mike Dillion needed to move house – fast. The 32-year-old data engineer had been offered his dream job working for a tech startup in New York, and he had three weeks to say goodbye to his parents, friends, car, cat and two-bedroom flat, pack his life into two suitcases and relocate from Lexington, Kentucky.

The prospects for accommodation did not look good. New York landlords usually demand that tenants commit to a 12-month lease – Dillion didn't want to sign one of those without even seeing the place. He could look for a sub-let, but he didn't want to spend his first month in his new job combing listings by day and touring grimy apartments by night. There were hotels. Airbnb. (The $545 per month he paid in rent in Lexington was suddenly looking like great value.) Then, scanning the Williamsburg listings on property website Zillow, Dillion came across a notice for a place called Pure House: "Communal homes... furnished and month-to-month... a nurturing environment."

The Pure House website was a little weird. The application form asked, "What are your passions?" and "How will you be an essential member of the community?". "I was suspicious," says Dillion. But the convenience was unbeatable, the $1,600 (£1,125) monthly rent felt fair – and, for someone with few friends in the city, the offer of community was appealing. Dillion thought about lonely nights in a studio with only Netflix for company. He clicked the link and sent in his application.

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Through a series of very commonplace decisions, Dillion had stumbled on large cities' hot housing trend: co-living. In San Francisco, New York and London, businesses such as Pure House are offering modern nomads the opportunity to switch location with something approaching seamlessness. There's no exhausting set-up: for a flat monthly rate, you get a bedroom, bathroom, kitchen and linen, with all utilities included.

Perhaps most importantly, you also get access to the community. Residents of co-living houses are "curated" for their suitability and willingness to mingle. That's what makes them different to a regular flatshare – here, at least in theory, everything is taken care of. Even the people are part of the package.

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There's only one downside: to get all this, you have to share. Co-living houses aren't dormitories, but they do involve some degree of cohabitation, whether that's in the bathroom, the kitchen or – in the case of thin-walled Pure House – wherever people are making noise. For many adults, this would be abhorrent. To a generation accustomed to the idea that sharing is caring, it seems less of a compromise. "What's being offered to a consumer is, 'We will give you a better living experience for the same price,'" says Arun Sundararajan, NEC faculty fellow at New York University's Stern School of Business. "The trade-off is sharing space, but it is becoming increasingly legitimised as something you pay for."

The movement is growing in scale. In Brooklyn, Pure House has been joined by Founders House, the Loft, Gramercy House and Common, a $20 million (£14m)-valued enterprise set up by General Assembly co-founder Brad Hargreaves. Larger operations are on the way. In Old Oak, north-west London, property developer The Collective has built a 551-room co-living tower block, with further space for 400 co-workers. Co-working decacorn WeWork is also betting big on co-living, with a 200-room building in Manhattan. According to an investor pitch deck leaked last August, WeWork expects accommodation to make up 21 per cent of its revenue, or $605 million, by 2018.

The overlap between co-living and co-working is no coincidence. Co-living startups are hoping that they can do to residential accommodation what co-working did to office space: attract young people to shared spaces, subverting the economics of real estate by offering access over ownership.

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Along the way, they want to clear up the housing crisis. Oh yes – and solve the problem of modern loneliness.

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A conceptual house rather than a real one, Pure House spans seven loft apartments across two buildings in the heart of Williamsburg. There is no central meeting point, so to maintain community spirit founder Ryan Fix has to initiate gatherings himself. On a freezing Thursday evening in February, he rouses the inhabitants over Slack: "POTLUCK TIME, MY PLACE IN 1 HOUR!"

Several hours later, the guests begin to dribble in: a mix of communal dwellers old and new. There's a green-haired Israeli art student who says she came to Pure House to find "a place you can't feel alone". There's also an AOL social media editor, a robotics engineer and an entrepreneur working on a dating app. Plus, of course, burly, bearded Mike Dillion, five months in New York and no longer the ingénue, who arrives bearing three single-serve bottles of wine from meal-delivery service Blue Apron.

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Fix, a small, lithe 41-year-old wearing jeans and a tight yoga top, greets the arrivals with hugs and words of encouragement. He is the sort of person who is always ready with a recommendation - improv classes, day raves, the fact that you must go to Burning Man. He turns to WIRED. "I love helping people actualise their dreams," he says. "It's my free high."

This is the room where Pure House started, and where Fix has lived since 2010. A former financier and real-estate broker – "too much about money, not really me" – Fix began hosting as a way of meeting like-minded people. When the apartment next door became available, he took that too, as well as several other rooms in the same building. Suddenly, he had a business – he was in co-living.

The history of co-living can be traced back through 60s Scandinavian communes and 19th-century boarding houses. (If Holmes and Watson lived at 221b Baker Street today, Mrs Hudson would be their community manager.) Its modern incarnation, however, has its roots, like so many things, in San Francisco.

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For some time, artisans of the city's startup scene have been gathering together to form "intentional communities": communes, done the tech way. These institutionalised houseshares help defray the cost of Silicon Valley living, but also fulfil the high-minded purpose of spreading ideas, forging connections and changing the world.

“We do tech talks, we have dinners once a week, we collaborate,” says Jeremy Swerdlow, one of the current members of Rainbow Mansion (tagline: "An intentional community of people working to optimise the galaxy"), a Silicon Valley co-living house set up by three Nasa researchers in 2006. “It’s not commercial. This is really sharing a philosophy and a passion.”

If these capitalist communes are the mother of co-living, the disreputable, absent father is the hacker house. Many in the co-living movement dislike these cheap, sparsely furnished dorms, which keep costs down and revenues up by packing entrepreneurs and developers in bunks; but their continued existence is proof both of concept and demand. It speaks to a wider problem: the crushing housing crisis afflicting not only San Francisco, but every large urban centre in the western world. A problem Silicon Valley has yet to solve.

The dream of co-living is to combine the energy and spirit of the commune with the commercial effectiveness of the dorm. It sounds simple – but the practice is far from straightforward. "[They're] attempting to commodify and scale community, which is difficult," says Chelsea Rustrum, co-author of It's a Shareable Life. "Co-living started with houses and in homes, so it's really about recreating home."

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When I ask Brad Hargreaves, the founder of Common, if he's ever been to Burning Man, he he gives a short, sharp laugh. “No, I have not.” He shakes his head. "The whole thing of sand getting in your hair, not getting a shower..."

It's Super Bowl Sunday, and whereas in Pure House a small group gathers for an evening of cuddling and meditation, a boisterous crowd has assembled at Common's property in Crown Heights, Brooklyn, to drink Bud, eat chicken wings and watch the game out of one eye. There's not a hammock, fairy light or handwritten motivational note in sight: instead it's all clean white walls, wooden floors and LED filament bulbs. "An interior decorator comes in and everything's perfect," Fix warns beforehand. He means it dismissively; it seems a mere statement of fact.

Away from the hubbub, Hargreaves sits in the kitchen sipping red wine. A slim, stubbled man wearing a blue shirt, jeans and brown brogues, his contained manner makes him seem older than 29. "One of the misconceptions around co-living is that you're sharing everything – sharing your emotions, being physically intimate – and that's not the case," he says. "I'm not looking to change the way people live. I'm looking to solve a housing need."

Common is the most advanced of the new breed of co-living startups. Since October 2015, it has opened two houses of 19 and 20 rooms, with another 51-room house unveiled in spring, and "numbers four through ten in the works". Venture-backed to the tune of $7.35 million, it works with developers on custom-built co-living houses designed for easy accessibility. For $1,565 to $1,950 a month (there are discounts for longer stays), members can enjoy the convenience of co-living without the ideological commitments.

In order to make co-living palatable to a wider audience, Hargreaves has smoothed many of its sharper edges. Groups sharing bathrooms are split up by gender. The self-help ethos of the commune has been replaced by complimentary linen changes and cupboards stocked with kitchen towels and disinfectant wipes. Even so, the fundamentals remain – sharing, flexibility, and, of course, community. "I needed a short-term place, plus something that's communal," says Kamilah Gray, a marketing manager for Bloomberg who moved in after a work relocation fell through and left her without an apartment. "A nice communal place, not a shitty dorm."

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"I like meeting people and sharing spaces," says Bryan Bumgardner, who came to Common from Missouri for a three-month programming bootcamp. "That feels more natural than suburbia, with your white picket fence and your 2.5 kids. I grew up watching that suck. I'm not going to be isolated from everyone."

Common has dedicated Slack groups, group events, a community manager and a code of values for its members. In the basement at the first property, also in Crown Heights, six A3 sheets hang at intervals along the wall. At the top, each one asks: "Which Common core value resonates with you and why?" As part of their induction, members take Polaroids of themselves and stick them on a sheet: the choices are "Keep Evolving" (the most popular option), "Lend a Hand" (the least), "Be Present", "Love the Journey", "Stay Curious" and "Open the Door".

Community may be a saccharine contemporary cliché, but the need for it is very real. According to a 2010 report by the Mental Health Foundation, 48 per cent of UK adults think we are getting lonelier as a society. Among the young, the "loneliness epidemic" has gone viral: nearly 60 per cent of 18- to-34-year-olds told the Mental Health Foundation they felt lonely often or sometimes.

Changes in housing are bringing people closer together. In 2000, 25 per cent of US adults lived with flatmates; by 2012, it was 32 per cent, according to research by property website Zillow. In large metro areas such as Los Angeles and New York, 48 and 42 per cent of people respectively live with people who aren't their partners.

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Yet human contact remains hard to find. A dizzying array of apps promise to provide meaningful connections, but for every Bumble date or YPlan gig there is a disproportionate amount of time spent scrolling, alone. "The benefits of being around an in-person community are accelerated and heightened by the amount of time we spend in front of our digital devices," Hargreaves says. "These places are set up for building communities, for people to get to know each other."

To build community, of course, you need community-spirited people. Like all co-living startups, Common operates a selection process: an online form followed by a video interview. Like all co-living entrepreneurs, Hargreaves is not keen to talk about it. (At the end of one interview, a founder asks if "there is a way not to talk about turning people away, because we like to be inclusive".) Common, Hargreaves maintains, is "first come, first served". "We don't want to get in the business of pre-selecting people - that would create a weird culture," he says. At Common, as elsewhere, they prefer the term "curation": that implies the right level of care and consideration, without overtones of exclusivity.

Besides making the mechanics of community-building uncomfortably evident, the issue of selection raises difficult questions about the tension between profit and purpose. Co-living operations are torn between filling the space and safeguarding the community. You have to have the right people, or the central selling point is lost; too few people, and the business side suffers.

In June 2015, co-living startup Campus closed 34 houses, with its founder Tom Currier, a Peter Thiel Fellow, admitting: "We were unable to make Campus economically viable." One of the biggest problems, according to residents, was the power it gave the community – such as members voting on new entrants. "It really hindered people moving in," says Annelie Chavez, a Campus community manager, now living at Common. "With Common you trust the team to make that decision and it fills the rooms much more quickly."

Can a self-selecting cadre of privileged young professionals really call itself a community? "The gentrification issue," Bumgardner calls it. He makes a face. "I feel bad about it, but where am I supposed to live?" "I'm conflicted," says Daniel, a 20-year-old who dropped out of college to take a software development course in New York. "It's gentrification and I'm part of the problem, but there wasn't much opportunity for me to not do that."

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But on Super Bowl night, such worries can be left for another time. After the game is over, several Commoners head to the garden, where a high wooden fence surrounds a pristine set of wooden furniture. It is impossible to see over to the other side. But inside, the Commoners smoke, laugh and shout. They are young, here and having fun: if this isn't community, then what is?

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The biggest question for co-living isn't "can it work?", but "can it scale?" Is it a niche option for latter-day hippies, or a way of housing a genuine mass of people? In a shabby suburb of north-west London, Reza Merchant, founder and CEO of The Collective, is putting that question to the test.

When it opened in May, The Collective Old Oak became the biggest co-living development in the world, with 551 rooms, including 452 "twodios" - flats with two bedrooms, shower and kitchenette - and 1,114m2 of collective space, as well as 400 co-working spots. "I don't mean to sound arrogant, but we're clearly pioneering co-living," Merchant says. "We started back in 2011, so we've been curating spaces for years."

2011 was the year Merchant, 27, the son of immigrants from India, used his parents' home as security to borrow £1.8m in order to buy a derelict hostel in Camden, which he renovated and turned into serviced apartments. The gamble paid off: he now has six residential buildings and three co-working spaces, all in London, with another Old Oak-sized development to come in Stratford in 2018.

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Merchant won't reveal how much Old Oak cost to construct, but says it is in "the several tens of millions". When WIRED visits in January, it is in the final stages of construction. Speaking over the scream of buzzsaws, Merchant shows the final location of the ground-floor restaurant, bar, lobby and grocery shop. A tall, slim man with a lordly manner (he made a brief appearance on reality-soap Made in Chelsea, where he was sold as the top lot in a charity auction), he manages to look elegantly bored even in his hard hat and high-vis jacket, which he wears draped over a long coat and double-breasted blue suit. "It's going to be heaving," he says.

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Upstairs, it won't take much to create a crowd. Each bedroom has space for little more than a bed, a chair and a wardrobe. (There will be additional storage at the back of the building for items such as suitcases.) "The idea is that these are essentially the crash pads," Merchant says. "Your living room is all of the communal space."

He points out the shared kitchen, the secret garden sitting room, the "disco launderette" where people can party while they wash. "You're getting access to so much more than if you were living in a house with five or six people."

It's the same equation behind all co-living developments - the smaller the rooms, the bigger the communal space - taken to its logical extreme. And if anything, this seems to be the direction co-living is headed. Co-working giant WeWork is preparing to move into accommodation, and as always, it's doing it at scale.

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According to a leaked investor pitch deck, WeWork's founders Adam Neumann and Miguel McKelvey plan to use the $400 million they raised in June 2015 to fill 69 WeLive locations with 34,000 members, all by 2018. The first WeLive will occupy 200 rooms on the upper floors of 110 Wall Street, a 27-storey skyscraper a block away from New York's East River. Other reported developments include similar sized projects in Brooklyn and Washington, DC.

McKelvey declines to comment on the accuracy of these projections. "Our focus is on 110 Wall," he says. "Once we've got it, then I think the whole world will be open to us, and we're confident about that."

A rule of thumb in co-living: the bigger the building, the blander the style. At WeLive, this means pegboard walls, exposed pipework and upbeat posters preaching "Home is where the Wi-Fi is". In The Collective, the rooms are decorated in three distinct themes: Loft, Hotel and Nordic - the difference in each case being the colour of the otherwise identical floor and furniture. The air in both is of a student hall of residence.

According to the Mayor of London's London Rents Map, the weekly median rent in Old Oak's postcode is £142. With rents for The Collective starting at £220, isn't Merchant worried these places won't get filled? Do earning adults want student accommodation?

As the tour goes on, the scale of the enterprise becomes clear. Yet Merchant's confidence never wavers. "[Success] is a state of mind: if you believe something enough, it will happen. What's the point of thinking about something that's never going to happen?"

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Gallery: Inside the weird world of co-living, Silicon Valley’s attempt to solve the housing crisis

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At times during WIRED's six-day stay in Pure House, it is possible to see the dream of co-living in action. In a strange city, it's good to have people around. As one ex-resident puts it: "You're acknowledged when you come home."

Yet despite this activity, the viability of Pure House seems precarious. Having had 25 apartments, Fix is now down to seven, and will soon be reduced to four. He is representing himself at the New York City Housing Court, accused by one of his landlords of running a business in a residential space. He has dark circles under his eyes; at times, he says, his hands shake.

For Fix, the heart of the matter is the conflict between community and structure. Community has to be made by the people themselves - by introducing rules and structure, he is only getting in the way of that. That is why he resisted the formal structure that could have made his life simpler.

But for a business to grow, it must become impersonal. The CEO stops knowing every customer. Then they stop knowing everyone in their company. Eventually, the personal relations disappear: there are customers who receive a service, and although people staff the system, the system is greater than any one individual.

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Co-living entrepreneurs look forward to the time when they can turn housing into such a system. "Living as a service," Merchant calls it. In this vision, co-living spaces are the "platform" on which people rest briefly - "live much more lightly", as McKelvey puts it. Everything will be rented, nothing will be burdensomely owned. Buying furniture, for example, will be unnecessary: McKelvey puts it in the category of "things you don't really need to have". "Look at the music industry," says James Scott, The Collective's 23-year-old COO. "Ten years ago the value was in the physical piece of music. Nowadays, people want to consume music for free, so the music industry needed to monetise the community. "If you apply that back to co-living; if the value is in the community that are in these spaces, I monetise the community. That means I don't have to monetise the space any more."

The Collective plans to partner with organisations to offer every conceivable add-on, from transport (Zipcar) to financial planning (Nutmeg) to "wardrobe as a service" - meaning clothes as part of the package. By selling access to his community this way, Scott anticipates that he will be eventually be able to offer accommodation without asking for payment. "In the midst of an affordability crisis, we'll have delivered free housing, because of the shift in attitude as to where value's created. And that is super disruptive, and really exciting."

Fix rates communities according to their members' involvement and commitment. But what looks to him like a weak community is really a different notion of community altogether: one that is not bound to a place, or people, but instead belongs nowhere, and is linked to you, like friends on Facebook or documents in the cloud. "We're slowly decoupling all of those things that tie you back to your physical space," says Scott. "The bubble in which you live is completely separated from the space in which you live in."

It's a vaulting – and not implausible – vision of the next stage of the networked society. Yet despite claiming to be a solution to social isolation, it sounds if anything lonelier than what came before.

Nick Wilson

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On March 1, 2016, Mike Dillion left Pure House for the last time. He had met someone – on Tinder, incidentally – and they were moving in together.

The move had not been pleasant. "Instead of the intimate questionnaire of, 'What's your passion, what are you here for?', it's 'Can we see inside of all of your bank accounts, please? May we see all your tax returns?' Almost violating," says Dillion. But now it was over he was able to reflect on the experience. "At times it felt regressive," he says. "I had been living alone and in my thirties. But it was what I needed. I'd do it again. It was a great transition."

Was he part of a new social movement? Witnessing the end of loneliness and the start of a different way of living? For Dillion, these questions seems less important than the practicalities of finding a place to rent. "It was attractive compared to the alternatives," he says. "It's a free market. The invisible hand guided me into Pure House."

This article was first published in the June 2016 issue of WIRED magazine